USI Holdings Corp. reported a 62 percent drop in net income forthe third quarter, primarily over deductions for discontinuedoperations related to the sale of seven operations.

Net income fell $3.02 million (7 cents a share), going from $4.9million (10 cents a share) to $1.89 million (3 cents a share).Income before the deduction for discontinued operations rose 6percent, from $5.2 million to $5.5 million. Revenues in the periodrose $24.3 million, up 24 percent to $127.3 million.

For the first nine months of 2005, net income dropped 72percent, or $11.3 million, going from $15.8 million (32 cents ashare) to $4.5 million (8 cents a share). Income before thededuction for discontinued operations fell 21 percent, or $3.5million, from $16.2 million to $12.8 million. Revenues grew 27percent, or $80 million, from $292 million to $372 million.

In a call today for investment analysts, executives for theBriarcliff Manor, N.Y.-based insurance broker said the firm isexperiencing high retention rates and seeing growth throughacquisitions. However, the firm added, revenues were affected by acombination of the soft market, losses charged to discontinuedoperations, charges related to integration, the company'simprovement plan and litigation costs.

The company continues to see strong growth in its benefitoperation, with net commissions and fees increasing 22 percent inthe period.

On the general status of the insurance market, David L. Eslick,chairman, president and chief executive officer, said, "Pricing andpredicting rates is more of an art than a science."

He said in California, strong competition will remain, driving asoft market there.

Overall, recent hurricanes are expected to cause price increasesin property for catastrophe-prone areas, possibly affectingCalifornia as well. He said pricing would go from soft to flat orslightly increasing.

Casualty could also see some flattening or slight increases, andprofessional liability could see some upward pressure. Employeebenefits will continue to be strong, he added.

"Overall, we are very bullish about our positioning andexecution heading into 2006, and if property-casualty rates just goflat, combined with our continued strength in benefits, it bodesvery well for our top line growth," he said.